Head of CBO: America’s Financial Counselor in Fiscal Cliff Talks

Elmendorf keeps a stuffed skunk in his office—a reminder of CBO’s reputation for being the skunk at the picnic. Photograph by Stephen Voss.

Most people haven’t heard of him. But it doesn’t take long
after a bill gets written for everyone on Capitol Hill to ask: What does
Doug Elmendorf have to say about it?

Like his predecessors, the 50-year-old economist toils in
obscurity, despite the power he wields as head of the Congressional Budget
Office. The nonpartisan agency is Congress’s fiscal referee, responsible
for estimating the cost of every major policy proposal or piece of
legislation. Today these estimates—“scores,” as they’re known on the
Hill—carry more weight than ever. Few things doom a bill faster than word
that it would add to the nation’s $16-trillion debt.

But that’s just the half of it.

Congress also looks to this bearded, bespectacled technocrat
for straight talk about where our fiscal policies are taking us, and the
outlook isn’t good.

Elmendorf described the problem in 2009 as “a fundamental
disconnect between the services the people expect the government to
provide . . . and the tax revenues that people are willing to send to the
government to finance those services.” Translation: Americans expect more
from the government than they’re willing to finance.

“I don’t usually get frustrated,” Elmendorf says on the way
back to his office from a recent House Budget Committee hearing. He has
just delivered his direst estimate yet of the nation’s long-term economic
outlook. Judging by the Q&A that followed, the committee registered
little, but he doesn’t seem bothered: “I don’t expect them to be experts
in budgets.”

That’s Elmendorf’s job, and he says he wouldn’t trade it for
anything. He seems to relish the challenge of being the nation’s financial
counselor in chief at a time of rising fear that the US is cruising toward
fiscal calamity.

In the coming weeks, Elmendorf and his staff will be sprinting
to analyze proposals and counterproposals as Congress attempts to address
a two-part problem.

First is the so-called fiscal cliff that looms at the end of
this year. Barring a change in law, the George W. Bush-era tax cuts will
expire and an immediate $100-billion across-the-board reduction in federal
spending will take effect, to be followed later by $1 trillion more. The
spending cut—known as the sequester—was part of a deal President Obama cut
with Congress last year to raise the nation’s debt limit. Many fear that
the sequester and the expiring tax cuts will put the country in a
European-style economic lurch.

To the extent Congress succeeds in extending tax cuts and
delaying budget cuts, odds are that the second part of the problem—a
long-term swell in the national debt—will trigger something far worse: a
loss of confidence in the US economy.

In short, fiscal crisis.

When—or if—that will happen remains a matter of debate, and
Elmendorf is one of very few people in a position to help Congress and the
White House do something to stop it, preventing the global economic
catastrophe that would follow.

• • •

Elmendorf is an economist with a Harvard PhD who introduces
himself as Doug and rides the Metro to work. He answers to Congress but is
about as close to being his own boss as anybody in Washington. Appointed
in 2009 by then-speaker of the House Nancy Pelosi, Elmendorf, a Democrat,
doesn’t play political favorites. His economic judgments regularly offend
and draw praise from both parties.

He was born in Mount Kisco, New York, in 1962 to a father who
was a programmer for IBM and a mother who was a math teacher. He went to
Princeton, where he found himself in orbit with economists who made up the
nation’s financial brain trust.

“I loved my freshman-year courses in economics,” Elmendorf
recalls. His professors Alan Blinder and Harvey Rosen would go on to serve
as top US economic advisers. “They were both fired up about the ability of
economic analysis to make the world a better place.”

During grad school at Harvard, his dissertation committee
included Greg Mankiw, Martin Feldstein, and Lawrence Summers, who served
as advisers to Presidents George W. Bush, Ronald Reagan, and Barack Obama,
respectively.

He also met fellow grad student Karen Dynan, who became his
wife. An expert in macroeconomics and household finance, Dynan is
codirector of the Brookings Institution’s economic-studies
program.

The couple live in Bethesda with their two daughters, both in
high school. They have coauthored several papers, and Mankiw once hired
Elmendorf and Dynan to help write a textbook—it answers questions about
monetary policy in the imaginary economy of Elmendyn.

“I love her because she’s smart, beautiful, charming, and
warm,” Elmendorf says of Dynan. “But it turns out she teaches me a lot
about economics.”

• • •

Elmendorf’s years in Washington have included roles in nearly
every arm of the nation’s economic establishment. He arrived in 1993 to
work at the Congressional Budget Office and later moved to the Federal
Reserve and the White House Council of Economic Advisers. In 1999, he
became deputy assistant secretary of the Treasury for economic policy. He
returned to the Fed in 2001, then moved to the Brookings Institution and
later back to CBO as director.

Such hopscotching would ordinarily be discouraged. “Smart
people mostly focus on something and become an expert on it,” Elmendorf
says. But he had planned to return to CBO, and his broad experience was in
some ways ideal, given the galaxy of legislative issues the agency is
asked to analyze. “It would have been terrible preparation for almost any
job but this one.”

Congress keeps Elmendorf and his staff of 235—mostly economists
and public-policy analysts—running. CBO will pump out 600 written cost
estimates this year and thousands more informal estimates.

On nights when Congress stays up late, CBO stays up later. When
congressional leaders struck a late-night deal on a highway bill in June,
CBO didn’t receive the final version of the 600-page plan until 4 am on a
Thursday morning—less than three days before highway programs were set to
expire and one day before most of Congress was to leave town. CBO returned
its analysis in time for leadership to hammer out an agreement and vote 36
hours later.

Most of the bills that CBO analyzes never become law. Many more
bills are never even analyzed because there isn’t time. Not getting a CBO
estimate can ruin a bill’s chances—even more than being given a hefty
price tag.

It can also get Elmendorf’s phone ringing—with calls from
lawmakers who hope to nudge a bill up CBO’s list of
priorities.

Elmendorf says it’s a misconception that he spends his days
getting yelled at on the phone: “There are people who call who are very
angry—that does happen—but there are also people who call and say thank
you.”

Nevertheless, some of CBO’s answers have sparked epic fights.
The Clinton administration railed against CBO in 1994, when the agency
toppled the President’s signature health-care initiative with estimates
that it would increase the size of government and cost far more than
expected. Elmendorf was part of the team of analysts that rendered the
lethal verdict under then-CBO director Robert Reischauer.

Says Reischauer, who was appointed by Democrats: “If the folks
who invited you to the dance want to drive you home at the end of it, you
haven’t done your job.”

Elmendorf would soon come to know the feeling.

In the spring of 2009, shortly after Elmendorf was appointed
CBO director, a group of former directors took him to lunch. It’s a
tradition at CBO, an opportunity to pass on institutional wisdom and
advice.

“I’m not sure they so much offered advice as just shared scary
stories,” Elmendorf recalls. His takeaway: Should he come under fire or
fail to make his views clear, it wouldn’t be the first time that has
happened to someone in his job.

But what followed a month later was a first for any CBO
director.

The issue—again—was health care. President Obama had begun the
reform effort promised during his campaign. Rather than write a giant bill
and hand it to Congress, as the Clintons had done, Obama put Congress in
charge of drafting the legislation. Early versions of what would become
known as Obamacare began to wend their way through congressional
committees in June of 2009.

On July 16, Elmendorf appeared before the Senate Budget
Committee to testify about the nation’s long-term budget outlook. But
Democratic chairman Kent Conrad wasted no time with his first
question.

“Dr. Elmendorf,” Conrad said. “I am going to really put you on
the spot because we are in the middle of this health-care debate, but it
is critically important that we get this right.”

He asked whether the current versions of the legislation would
reduce the cost of health care over time.

The answer reverberated across the Hill. With a few sentences,
Elmendorf had upended one of the central premises of the Democrats’
arguments: that overhauling health care would save money.

Some Democrats, who had hoped to have a bill done by the August
recess, fumed. Senate majority leader Harry Reid snapped: “What
[Elmendorf] should do is maybe run for Congress.” House Republican leader
John Boehner said Elmendorf had made clear “that one of the Democrats’
chief talking points is pure fiction.”

Peter Orszag, the former CBO director Obama tapped to lead the
White House Office of Management and Budget, used his blog to say that his
former agency had “overstepped.”

Elmendorf and other experts were asked to come to the Oval
Office to explain their analysis to the President. No CBO director had
ever been called to a meeting with the President at the White House, as
Philip G. Joyce notes in his history of the agency, The Congressional
Budget Office: Honest Numbers, Power, and Policymaking.

Some feared that the summons was an effort to compromise CBO’s
independence and to take Elmendorf to the woodshed. But evidence suggests
it was CBO that forced the President to change course, not the other way
around. As the New Yorker’s Ryan Lizza reported earlier this
year, it was the threat of a costly analysis from CBO that pushed Obama to
backtrack on his campaign’s opposition to the so-called individual
mandate, the legal requirement that people purchase health
insurance.

Obama first publicly flipped on the issue during an interview
with CBS News on July 17, shortly after House Democrats embraced the
individual mandate in their version of the legislation and exactly one day
after Elmendorf gave his explosive testimony.

In fact, Lizza reported, Obama became so frustrated with CBO
during the health-care debate that he banned aides from uttering the
agency’s three-letter name. Instead, the President referred to the agency
as “banana.”

Like his predecessors, Elmendorf seems to take pride in such
episodes. He keeps a plastic banana on the bookshelf in his office—next to
the stuffed skunk that he was given as a reminder of the agency’s
reputation for being the skunk at the picnic.

• • •

Few denizens of Capitol Hill understand better than Elmendorf
how words can be taken out of context—how 30-second sound bites can be
snipped from hours of live testimony and uploaded to YouTube or looped
into the endless cable-news cycle. He walks a verbal tightrope every time
he appears before Congress.

It’s why he spends hours before each hearing in a secret
location—unknown, apparently, even to top aides—with his iPhone shut off
and a stack of binders for a last-minute cram session. He chooses his
words. He considers his explanations. He anticipates
questions.

“They never feel routine,” Elmendorf says of the hearings.
“I’ve done dozens of them now, but the stakes are high. If I get something
wrong, then it can create all sorts of confusion in the
world.”

Former CBO director Robert Reischauer says breaking through the
media and political distortion is one of Elmendorf’s toughest challenges:
“I’m probably the biggest pessimist in town. I think that modern
democracy, mixed with the digital revolution, might be incapable of
addressing these types of issues.”

That seemed to be confirmed during Elmendorf’s June appearance
before the House Budget Committee to address the nation’s fiscal outlook.
There were long-winded questions about Mitt Romney’s economic plan (CBO
doesn’t analyze presidential candidates’ platforms), red-faced anti-Obama
rants, and partisan talking points disguised as questions.

Of particular interest to several Republicans was the 2009
federal stimulus.

According to CBO’s analysis, the $800 billion in government
spending had a positive effect on the economy. Barring some offsetting
spending cuts or tax increases down the road, however, the additional debt
would put a drag on the economy ten years later. Democrats tend to focus
on the first half of that analysis, Republicans on the second.

“So it would be inappropriate to double down in terms of a
failed program?” asked Texas Republican Bill Flores in a typical exchange.
“If . . . stimulus version 1.0 didn’t work, why would stimulus 2.0 work
any better?”

“Well, Congressman, as you understand—and I recognize you don’t
agree with us—but our position is that the Recovery Act was not a failed
program,” Elmendorf said.

For all the debate that day over the 2009 stimulus, there was
comparatively little discussion about the end-of-year fiscal cliff. Or of
real solutions to the long-term debt problem, the “fundamental disconnect”
between tax and spending policies that threatens to drive the US economy
into the ground.

Fiscal-policy decisions made by Congress in the coming months
could mean the difference between a decade or more of economic growth,
stagnation, and decline. Those decisions will be made on Elmendorf’s
watch. Who would want the pressure—or the hours?

Elmendorf estimates that he works 60 to 70 hours a week: “I’m
not proud of that, but there is a lot of work to do. I’d like to see more
of my kids.”

But he doesn’t seem bothered by the pressure. Quite the
opposite. Before the start of the Budget Committee hearing earlier that
day, Paul Ryan, committee chairman and soon-to-be Romney running mate,
bounded over to Elmendorf to shake his hand and pop his usual friendly
question: “Are you living the dream?”

“My answer is yes, I am,” Elmendorf says today. “For somebody
of my interests, I have the best job in Washington.”

Freelance writer Paul Quinlan (paulrq@gmail.com) recently moved from DC to Charleston, South Carolina.